Warren Buffett isn't beating the market so far in 2019. Shares of Buffett's Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) are up only 2% year to date, while the S&P 500 index has turned in a double-digit gain.
But at least some of Buffett's picks are performing really well. Three high-flying stocks in Berkshire's portfolio are Amazon.com (NASDAQ: AMZN), Apple (NASDAQ: AAPL), and Mastercard (NYSE: MA). Here's why these three Buffett stocks still look like great choices to buy this month.
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Buffett recently revealed that the company has been buying shares of e-commerce giant Amazon. Technically, however, Buffett didn't pick Amazon. The decision was made by one of his top investment managers at Berkshire.
But Buffett has liked Amazon and its founder, Jeff Bezos, for quite a while. And he's probably not complaining about the choice to include the stock in Berkshire's holdings. Amazon's shares have soared nearly 26% so far this year. More importantly, the company has plenty of ways it can grow.
When you think about Amazon, online shopping probably first comes to mind. That's certainly a major source of revenue for the company. However, Amazon's real profit driver is its cloud services business, Amazon Web Services (AWS). Look for continued strong growth from AWS, as well as from other relatively new initiatives, including digital advertising.
Another technology-oriented and consumer-focused stock that Buffett likes is Apple. In fact, Buffett likes Apple so much that it's the single biggest holding in Berkshire's portfolio.
Apple's share price is up 25% this year and was even higher earlier in May. Buffett doesn't mind that the stock's dipping at all, though. Why? He loves Apple's share repurchases. A lower stock price means the company can buy back its shares more cheaply. And that's good for Berkshire Hathaway over the long run.
Some investors might be concerned about Apple's waning iPhone sales. But that's short-sighted. The push to high-speed 5G networks could give the company a big boost when it rolls out its new 5G-capable iPhones -- probably next year. Also, Apple's services revenue is growing so quickly that the company is less dependent on iPhone sales than it used to be.
Mastercard isn't one of Berkshire's top holdings. However, the stock has been a big winner for Buffett, more than tripling over the past five years. Mastercard's shares are up 31% year to date.
Buffett loves businesses that are easy to understand. Mastercard definitely checks that box. The company makes nearly all of its money from credit card transaction processing fees, volume-based fees assessed to credit card issuers and merchants' banks, and currency conversion services.
What's really great about Mastercard is that its pathway to growth appears to be set. We're moving increasingly closer to a cashless society. Credit cards and other forms of electronic payment are so convenient that many customers and businesses prefer them to cash. As the second-largest credit card company in the world, Mastercard is poised to benefit from this seemingly unstoppable trend.
The key Buffett criteria
You might look at the valuations of these three stocks and think they're too pricey. Amazon, for example, trades at nearly 50 times expected earnings. Mastercard's forward earnings multiple is over 27. Apple isn't a steal, either, with shares trading at close to 16 times expected earnings.
But remember that Buffett long ago moved away from focusing on bargain-basement-priced stocks. Instead, he thinks that "it's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
Amazon, Apple, and Mastercard are wonderful companies. They're well run. They have great products and services. They have the business moats Buffett loves. And the stocks can be bought right now at fair prices. Their share prices are fair because each of these companies has tremendous growth prospects.
There's a reason Amazon, Apple, and Mastercard are among the best-performing stocks in Berkshire Hathaway's portfolio. These high-flying Buffett stocks should be winners for a long time to come.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Keith Speights owns shares of Apple. The Motley Fool owns shares of and recommends Amazon, Apple, Berkshire Hathaway (B shares), and Mastercard. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.